More than half of financial market participants believe social media provides daily opportunities to capture alpha, according to research from tick data analytics specialist OneMarketData.
A survey of both buy- and sell-side firms found that social media is of growing interest to financial market firms as an aid to making trading and investment decisions.
While 56% felt social media could be used to capture alpha, just 18% of firms are using social media data as part of their investment process today.
However, firms are keen to tap into this new data stream, according to OneMarketData, with 35% currently researching ways of incorporating social media into their trading and investment strategy.
Louis Lovas, director of solutions at OneMarketData, said: "We're in the middle of an important change in the way social media is being viewed by financial market participants.
"While there is still quite a bit of skepticism in the industry around the credibility of social media as a source to generate alpha, interest is rapidly growing as both regulators and market participants have signaled they are paying attention to the medium."
Since an Associated Press Twitter hack in April, which falsely stated that the White House had been attacked, saw the Dow Jones briefly drop 143 points, few have doubted that social media can move markets and many firms are now looking to find ways of integrating this data into more conventional market streams.
Respondents to OneMarketData's survey felt that equity traders would be the biggest beneficiaries of social media data, while 30% thought futures and options traders would gain. Fixed income was the asset class least thought to benefit, with 43% of respondents saying bonds trading would not be helped by social media feeds.
However, the potential for false positives, as demonstrated by the Associated Press hack, is the biggest concern over using social media data, cited by 62% of respondents.
"As social media data continues to gain validation in the industry, demand for solutions that can harness the power and reduce the risk of this new data source will also grow," Lovas added. "As we hit that point, our view is that social media will prove to upend the way market participants use information to trigger trading and investment decisions."